INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES In the arbitration proceedings between CHURCHILL MINING PLC AND PLANET MINING PTY LTD Applicants and REPUBLIC OF INDONESIA Respondent ICSID Case No. ARB/12/14 and ARB/12/40 ANNULMENT PROCEEDINGS DECISION ON ANNULMENT Members of the ad hoc Committee Judge Dominique Hascher, President Professor Dr. Karl-Heinz Böckstiegel Ms. Jean Kalicki Secretary of the ad hoc Committee Ms. Laura Bergamini Date of dispatch to the Parties: March 18, 2019
Transcript
INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES
70. On January 12, 2015, the Tribunal issued Procedural Order No. 15 (“PO15”) denying the
Claimants’ request for reconsideration and reaffirming PO13.13 At paragraph 34 of PO15,
the Tribunal described the scope of the document authenticity phase as follows:
The Tribunal is also mindful of the Claimants’ argument that
their allegedly surviving claims are intertwined with the
forgery allegations. At this stage of the proceedings, it
appears correct that for instance the facts in support of
estoppel overlap with the facts of the expropriation and fair
and equitable treatment claims. However, these overlapping
facts are not meant to be part of the bifurcated issues. Indeed,
paragraph 28 of PO13 defines the scope of the authenticity
phase as comprising (i) the factual aspects of forgery and (ii)
the legal consequences of a finding of forgery. Accordingly,
the document authenticity phase was defined as being
limited to (i) the factual question whether the impugned
documents are authentic or not (including especially who
signed the documents and how) and (ii) legal submissions on
the positions in law in a scenario where there would be
forgery (including for instance the legal requirements for
estoppel, as opposed to the facts allegedly justifying a
finding of estoppel).
The Tribunal also set forth a revised calendar for the document authenticity phase.
71. On February 3, 2015, Clifford Chance informed the Tribunal that they had been appointed
to represent the Claimants in the arbitration.
72. On February 13, 2015, the Respondent informed the Tribunal of the Parties’ agreement to
conduct a second document inspection the week of April 13, 2015.
73. On March 13, 2015, the Parties exchanged their requests for production and inspection of
documents.
74. Following further exchanges between the Parties, on April 6, 2015, the Tribunal issued
Procedural Order No. 16 (“PO16”), addressing the Parties’ requests for production of
documents and inspection.14 In particular, the Tribunal granted the Claimants’ requests
13 Exhibit A-16. 14 Exhibits A-19(1) and A-19(2).
14
Nos. 11 and 16 (requesting the production of investigative material, the “Police Files”) and
dismissed the Respondent’s objection based on the confidentiality of such documents.15
75. On April 16 and 17, 2015, a second document inspection took place in Singapore under
the supervision of ICSID.
76. On April 20, 2015, the State requested, inter alia, that the Tribunal reconsider its decisions
in PO16 requiring the production of the Police Files or, in the alternative, that the Tribunal
not draw any adverse inferences from the Respondent’s failure to produce these
documents.16
77. On April 24, 2015, the Claimants opposed the Respondent’s request for reconsideration
and argued that the State was hampering their ability to rebut the State’s serious allegations
of fraud and limiting the Tribunal’s ability to make an informed and fair decision.17
78. On April 29, 2015, the Claimants wrote to the Tribunal pointing out that the time limit to
produce documents had lapsed without the requested documents being produced and
soliciting the Tribunal’s decision on the Respondent’s request for reconsideration of PO16
with respect to the Police Files.18
79. On April 30, 2015, the Respondent replied to the Claimants’ latest submissions and
reiterated its request for reconsideration of PO16, also stating that the Police Files could
not be produced while the police investigation was ongoing.19 The Claimants responded to
the Respondent’s letter on May 5, 2015.20
80. On May 12, 2015, the Tribunal decided on a few pending issues, including the
Respondent’s request for reconsideration of PO16. The Tribunal took note of the non-
production of the Police Files and the Parties’ positions as to the justification (or lack of
15 Exhibit A-19(2), para. 6. 16 Exhibit A-20. 17 Exhibit A-21. 18 Exhibit A-22. 19 Exhibit A-23. 20 Exhibit A-24 (this letter is incorrectly dated April 5, 2015).
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justification) for the non-production and adverse inferences. The Tribunal noted that it
would “take these matters into consideration if and when relevant to the assessment of the
evidence before it, being specified that the Parties may further address these matters in
their post-hearing briefs if they so wish.”21
81. On May 29, 2015, the Claimants filed their reply to the Forgery Dismissal Application
along with supporting documentation.22
82. On July 14, 2015, the President of the Tribunal and the Parties held a pre-hearing telephone
conference to discuss the organization of the hearing on document authenticity.
83. On July 30, 2015, following the Respondent’s indication that Mr. Noor would not be
available to testify at the hearing, the Claimants requested that (i) the Tribunal disregard
Mr. Noor’s witness statement; (ii) Mr. Noor’s witness statement be struck from the record;
and (iii) the State’s submissions relying upon Mr. Noor’s witness statement be disregarded.
84. On August 1, 2015, the Tribunal advised the Parties that it had questions for Mr. Noor and
invited counsel for the Respondent to inform Mr. Noor that the Tribunal would appreciate
the opportunity of hearing him at the hearing.
85. On August 2, 2015, a third document inspection took place in Singapore under the
supervision of ICSID.
86. The hearing on document authenticity took place from August 3 to 10, 2015 in Singapore
(the “2015 Hearing”).23 Mr. Noor did not appear and the Tribunal, after hearing the Parties,
decided to disregard his witness statement.24 On the last day of the 2015 Hearing, the
Tribunal and the Parties discussed the way forward and the questions to be addressed in
the post-hearing briefs.
21 Exhibit A-25. 22 Exhibits A-26, A-26(1), A-26(2), A-26(3) and A-26(4). 23 The 2015 Hearing transcripts have been submitted into the record as Exhibits A-28 through A-34. 24 Exhibit A-29, [Kaufmann-Kohler] [8:19] to [8:24].
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87. On August 20, 2015, the Tribunal issued Procedural Order No. 20 (“PO20”) dealing with
post-hearing matters.25 The Tribunal invited the Parties to address a few questions in their
post-hearing briefs26 and stated that:
Having considered the positions set forth by the Parties at
the end of the hearing, the Tribunal confirms that the Parties
are to address matters falling within the scope of Procedural
Order No. 15 especially paragraph 34. In other words, the
Parties shall address (i) the factual question whether the
impugned documents are authentic or not and (ii) the legal
consequences of a finding of forgery. Matter (i) includes the
question whether, if they were not handwritten, the
impugned signatures were affixed with authority. Matter (ii)
about the legal position in the event of forgery does not cover
the effect of the possible invalidity of the survey and
exploration licenses on the exploitation licenses. The present
directions come in lieu of any different comments made by
the Tribunal at the hearing.27
88. On October 20, 2015, the Parties filed their post-hearing briefs.28 The Parties filed their
replies to the post-hearing briefs on November 17, 201529 and then exchanged their
submissions on costs.
89. On September 9, 2016, the Tribunal invited the Parties to provide their views on paragraph
163 of the Minnotte v. Poland award (“Minnotte”) in connection with three specific issues
(“Minnotte Direction”). Minnotte was a decision dealing with the consequences of third
party fraud on which none of the Parties had previously relied. The Tribunal authorised the
Parties to submit their comments (limited to 15 pages) with supporting legal authorities,
and reply submissions (limited to 8 pages) without legal authorities. It further specified that
“[i]f the parties consider it useful to refer to facts in addressing the issues set out above,
they shall do so on the basis of the evidence in the record,” and that “[o]nce it has
25 Exhibit A-35. 26 Exhibit A-35, para. 6. 27 Exhibit A-35, para. 5. 28 Exhibits A-36(1) and A-36(2) and Exhibit A-37. 29 Exhibits A-38, A-39(1) and A-39(2).
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deliberated on these additional submissions, the Tribunal expects to be in a position to issue
its decision(s)/award(s).”30
90. On September 23, 2016, the Claimants filed their comments on Minnotte with the
Secretariat. On the same day, the Respondent requested a one-week extension to file its
comments.
91. On September 24, 2016, the Tribunal extended the time limit for the Parties’ comments on
Minnotte until September 27, 2016 and for the reply submissions until October 11, 2016.
92. The Parties timely filed their comments on Minnotte31 and their reply submissions32 and
consented to the issuance of one decision/award for the two joined arbitration cases.
93. The proceedings were closed on December 6, 2016.
THE RESPONDENT’S POSITION BEFORE THE TRIBUNAL
94. The Respondent’s position before the Tribunal is set out in detail in paragraphs 100, 101,
and from 106 to 176 of the Award.
95. In short, the State claimed that the mining licenses and related approvals held by the
Ridlatama Companies (which constituted the basis for the Claimants’ investments in
EKCP) were forged and fabricated as part of “a massive, systemic and sophisticated
scheme to defraud the Republic of Indonesia.” Specifically, the Respondent disputed the
authenticity of 34 documents listed in paragraph 108 of the Award and argued that the
upgrading of the non-authentic survey and exploration licenses to exploitation mining
licenses in March 2009 was secured through deception and fraud.
96. The State argued that a finding of forgery and fraud would dispose of the Claimants’ entire
case because the Claimants’ investments depend entirely on the rights conveyed by the
licenses allegedly held by the Ridlatama Companies.
30 Exhibit A-41. 31 Exhibits A-42 and A-43. 32 Exhibits A-44 and A-45.
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97. Accordingly, the Respondent requested that the Tribunal issue an award:
(i) Deciding that the Ridlatama Companies’ mining licenses for general survey and
exploration upgrades were forged;
(ii) Deciding that the other impugned documents were forged;
(iii) Dismissing all claims asserted by the Claimants; and
(iv) Ordering the Claimants to pay the legal fees, expenses and other costs incurred by
the Respondent in connection with the arbitration.33
98. In its reply post-hearing brief, the Respondent requested that the Tribunal:
(a) Find that the Ridlatama Companies’ mining undertaking licenses for general survey
and exploration were not authentic;
(b) Find that the other impugned documents were not authentic;
(c) Issue an award dismissing all of the claims asserted by the Claimants;
(d) Order the Claimants to pay the legal fees, expenses and other costs incurred by the
Respondent in connection with the arbitration; and
(e) Order such other relief as it deemed appropriate.34
THE CLAIMANTS’ POSITION BEFORE THE TRIBUNAL
99. Churchill and Planet’s position before the Tribunal is described in paragraphs 102, 103,
and from 177 to 227 of the Award.
100. The Claimants maintained that the State failed to provide “clear and convincing evidence”
that the disputed documents were forged and fabricated by Ridlatama, or of the existence
of a massive, systematic and sophisticated scheme to defraud the Respondent. They further
33 Award, para. 100. 34 Award, para. 101.
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claimed that the signatures on the 34 documents were authorised and hence the documents
were validly issued.
101. The Claimants submitted that the legal consequences of a finding of forgery or fraud would
be very limited as the majority of the Claimants’ investments would in any event remain
legally valid. They further argued that the State failed to provide cogent reasons why a
finding of forgery would lead to the dismissal of the Claimants’ case and admitted, at the
2015 Hearing, that a factual finding of forgery would not determine the legal question of
the validity of the disputed licenses nor of the Exploitation Licenses under Indonesian law
(on which no arguments or expert evidence was presented to the Tribunal). Churchill and
Planet also argued that Mr. Noor’s refusal to attend the 2015 Hearing and the exclusion of
his witness statement disposed of the Respondent’s case on the Exploitation Licenses,
which the Parties did not dispute he had signed by hand.
102. In any event, according to the Claimants, a finding of forgery would not affect their case
considering the following legal arguments: estoppel, acquiescence, legitimate
expectations, unjust enrichment, and internationally composite wrongful act.
103. Accordingly, the Claimants requested that the Tribunal dismiss the Forgery Dismissal
Application and order that the Respondent pay the Claimants’ legal costs in full.35
THE ANALYSIS OF THE TRIBUNAL
104. The Tribunal began its analysis by addressing a few preliminary issues, including the scope
of the Award, the applicable law to the merits, and the burden and standard of proof.36 As
to the burden and standard of proof, the Tribunal found that:
It is a well-established rule in international law that each
Party bears the burden of proving the facts which it alleges
(actori incumbit onus probandi). Since the Respondent
alleges that the Survey and Exploration Licenses and related
documents are forged and that the Exploitation Licenses
Applicants, based on this provision, ad hoc committees have found that tribunals cannot
“surprise” the parties with issues that neither of them has invoked, argued or reasonably
anticipated,58 nor conduct factual investigations on issues that may prove determinative of
the outcome of the case without re-opening the proceedings.59 The Applicants further argue
that ICSID case law requires tribunals to grant the parties a full opportunity to be heard if
they wish to apply a legal framework different from that argued by the parties.60
116. The Applicants claim that a breach of a fundamental rule of procedure is “serious” if the
violation is substantial and such as to deprive the complainant of the protection that the
rule was intended to provide.61
a. The Minnotte Direction
117. The Applicants claim that, by not allowing evidence relevant to the legal framework
introduced by the Minnotte Direction, the Tribunal deprived them of a full opportunity to
present their case on a novel legal framework that the Award found decisive.62
118. According to the Applicants, PO15 and PO20 limited the scope of the factual inquiry in
the document authenticity phase to the issue of whether the impugned documents were
authentic.63 In the Applicants’ view, by signalling that it did not want to hear about the
facts allegedly justifying a finding of estoppel, the Tribunal excluded from the scope of the
document authenticity phase the factual aspects of any legal theory in which evidence of
good faith was required (including the theory underlying Minnotte).64 However, the
Applicants note, more than one year after the 2015 Hearing, the Tribunal introduced ex
officio Minnotte, which raised issues very different than those addressed in the document
authenticity phase (including lack of due care or negligence of the investor to investigate
58 Annulment Application, para. 84. 59 Annulment Application, para. 84; see also Tr. Day 2 [Luttrell] [37:19] to [37:25] and [41:2] to [43:20]. 60 Annulment Application, para. 84; see also Tr. Day 2 [Luttrell] [37:19] to [37:25] and [41:2] to [43:20]. 61 Annulment Application, paras. 85 and 86. 62 Annulment Application, paras. 87-104; Reply, paras. 28-68; Tr. Day 1 [Sheppard] [47:1] to [53:17] and Tr. Day 2
[Luttrell] [43:21] to [45:25]. 63 Annulment Application, para. 88; Tr. Day 1 [Sheppard] [47:9] to [47:12]. 64 Reply, para. 37.
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the factual circumstances surrounding the making of the investment, and the deliberate
closing of the eyes to an indication of serious misconduct or crime).65 According to the
Applicants, with the Minnotte Direction, the Tribunal surprised the Parties with a legal
theory that was not subject to debate and that the Parties could not anticipate.66 At that
time, the Applicants had not led (and could not have led) evidence in relation to the factors
relevant to the Minnotte test because neither of the Parties had relied upon this decision or
anticipated the case.67 However, in the Minnotte Direction, the Tribunal limited the Parties’
submissions to the existing evidence in the record, thereby precluding them from filing
evidence necessary to address the Minnotte factors and denying them the opportunity to
present their case,68 as the Applicants promptly protested.69 Furthermore, the Tribunal
eventually decided to dismiss the case based on the novel legal framework.70
119. According to the Applicants, the matters identified in the Minnotte Direction were not part
of the Respondent’s theory in the document authenticity phase (as the Respondent had
consistently claimed that the Claimants’ good faith and state of mind were not relevant).71
The Applicants accept that the arbitration record included some evidence on such issues,
but highlight that this evidence was not exhaustive.72 Specifically, the Applicants contend
that the evidence relevant to the first Minnotte factor (due diligence) was partial because it
had been submitted “incidentally” (in support of their estoppel claim and in response to a
specific part of the State’s case) and not to prove the Minnotte factor.73 In this regard, they
note that, for instance, no evidence had been submitted on the due diligence practices of
investors generally in the Indonesian mining sector in the relevant period, evidence which
in their view would be required to assess the adequacy of their own diligence.74 The
Applicants further argue that the arbitration record contained virtually no evidence on the
65 Annulment Application, paras. 91-104; Tr. Day 1 [Sheppard] [47:20] to [48:4]. 66 Annulment Application, paras. 98-104. 67 Tr. Day 1 [Sheppard] [47:13] to [47:17]. 68 Annulment Application, paras. 93-104; Tr. Day 1 [Sheppard] [48:5] to [48:13]. 69 Annulment Application, para. 93; Reply, paras. 6, and 28-47. 70 Annulment Application, para. 95. 71 Reply, para. 29. 72 Annulment Application, paras. 89-91; Tr. Day 1 [Sheppard] [48:18] 73 Annulment Application, paras. 89-91; Tr. Day 1 [Sheppard] [48:21] to [49:17]. 74 Annulment Application, para. 92.
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second Minnotte factor (deliberate closing of eyes) because this factor was not relevant to
the document authenticity phase as scoped by the Tribunal.75 In this respect they note that,
for instance, no evidence had been presented on the Applicants’ reasonable reliance on the
State’s assurances.76
120. The Applicants further argue that the breach of due process was serious because the
Minnotte factors were dispositive (as the overall structure of the Award shows) and the
new evidence that they could have proffered (including the testimony of Mr. Mazak) could
have impacted the Award.77
121. At the Hearing, the Applicants also argued that the Tribunal breached due process by
making a decision on admissibility without previously informing the Parties that
international public policy and principles of good faith were issues to be addressed in the
document authenticity phase.78 According to the Applicants, it was improper for the
Tribunal to introduce an argument that wholly favoured one side (the State) and make a
finding on admissibility without hearing arguments and evidence on all of the arguments
in the round (including the Applicants’ counter-arguments).79 The Applicants also argued
that the Tribunal did not treat the Parties equally as it applied “good faith […]
asymmetrically, only to the Claimants.”80 According to the Applicants, having explored
the good faith of Churchill under Minnotte, it was incumbent on the Tribunal to also weigh
the good faith and the role of the State when making its finding on admissibility.81
75 Tr. Day 1 [Sheppard] [49:18] to [49:22]. 76 Tr. Day 1 [Sheppard] [50:15] to [50:20]. 77 Annulment Application, paras. 94 and 95; Reply, paras. 46-57, and 58-68; Tr. Day 1 [Sheppard] [51:16] to [52:25]. 78 Tr. Day 1 [Sheppard] [40:14] to [53:17]. 79 Tr. Day 1 [Sheppard] [46:8] to [46:13]. 80 Tr. Day 1 [Sheppard] [57:18] to [57:22]. 81 Tr. Day 1 [Sheppard] [53:18] to [60:9].
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b. The re-admission of Mr. Noor’s evidence
122. The Applicants contend that the Tribunal denied their right to be heard on whether Mr.
Noor’s, the former Regent of East Kutai, evidence should be effectively (even if not
formally) re-admitted and given weight.82
123. According to the Applicants, the State’s main use of Mr. Noor’s testimony was to prove
that the Exploitation Licenses were void even if they were not forged.83 In spite of its
decision to disregard Mr. Noor’s witness statement (paragraph 84 of the Award), the
Tribunal referred to Mr. Noor’s testimony in paragraph 165 of the Award and gave weight
to it at paragraph 512 when concluding that the hand-signed Exploitation Licenses were
issued on the “misguided assumption” that the entire operation rested on valid mining
rights.84 In the Applicants’ view, the only evidence the Tribunal could possibly have relied
upon in making this finding was Mr. Noor’s witness statement.85
124. The Applicants further argue that, by effectively readmitting Mr. Noor’s evidence without
prior notice, the Tribunal left them “with no ability to rebut the presumption which had
been formed in the [T]ribunal’s mind that the [E]xploitation [L]icenses had been signed on
a misguided assumption” since they could no longer cross-examine Mr. Noor.86 They
further argue that this decision, compared with the way the Tribunal treated the Police
Files, shows that the Tribunal treated the Parties unequally.87
125. According to the Applicants, the breach of their procedural rights had a material impact
upon the outcome of the Award as it led to the effective re-admission of Mr. Noor’s
evidence, which then was critical for the Tribunal’s finding on fraud under the Minnotte
test.88
82 Annulment Application, paras. 105-112; Reply, paras. 90-102. 83 Reply, paras. 91 and 92. 84 Annulment Application, paras. 105-112. 85 Reply, paras. 97-99. 86 Tr. Day 1 [Sheppard] [66:1] to [66:10]. 87 Tr. Day 1 [Sheppard] [66:18] to [67:23]. 88 Annulment Application, para. 112.
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c. The reversal of the burden of proof in relation to fraud
and deception and to the Minnotte factors
126. Churchill and Planet claim that, notwithstanding the finding in paragraph 238 of the Award,
the Tribunal reversed the burden of proof in breach of the principle actori incumbit
probatio and put the burden of proof on the Claimants, including with respect to fraud and
deception.89
127. The Applicants point to paragraph 522 of the Award to argue that the Tribunal placed on
the Claimants the burden to disprove forgery.90 They further refer to paragraph 512 of the
Award and argue that the finding therein can only be explained by a reversal of the burden
to prove deception.91 According to the Applicants, this paragraph suggests that the Tribunal
(i) placed on them the burden of proving that Mr. Noor did not hand-sign the Exploitation
Licenses due to the “false impression” of their lawful entitlement, and (ii) found that they
had not met their burden. In the Applicants’ view, however, it was for the party asserting
deception (the State) to prove that the “false impression” created by the forged documents
was “used” to influence Mr. Noor to sign the Exploitation Licenses.92 Since the evidence
relied upon by the State (Mr. Noor’s testimony) to this purpose was struck from the record,
the Tribunal had no reason to require the Claimants to disprove deception.93
128. The Applicants further state that this unlawful allocation of the burden of proof had a major
impact on the outcome of the case because the Applicants could not discharge the burden
placed upon them without cross-examining Mr. Noor.94 The Applicants argue that the
overall procedural treatment of Mr. Noor’s evidence (including the Tribunal’s refusal to
89 Annulment Application, paras. 123-127; Reply, paras. 103-106. 90 Para. 522 of the Award reads in its relevant part as follows: “the Claimants did not seek to ascertain the means of
signing mining licenses in Indonesia […] although that information would have been readily available.” The
Applicants further note that the Tribunal’s condemnation in paragraph 522 cannot square with the admission of the
former Regent, Mr. Ishak, who acknowledged that “anything can happen” inside the Regency (Annulment
draw adverse inferences from his non-appearance) may call into question the impartiality
of the Tribunal.95
129. Finally, the Applicants allege that the Tribunal reversed the burden to prove the Minnotte
factors.96 According to the Applicants, it was for the State (who had asserted fraud and
forgery) to submit evidence on what a “reasonable investor in the Indonesian mining
sector” would have done in the circumstances of the case because they could not possibly
bear the burden of proving the benchmark against which their own conduct was to be
tested.97 As the State brought no evidence on the due diligence standards, the burden of
proof on this point could never have shifted on the Claimants.98
d. The Infection Issue
130. The Applicants argue that the Tribunal denied their right to be heard on whether the
Exploitation Licenses were stand-alone legal title instruments that, under Indonesian law,
remained valid even if the underlying documents were forged (the “Infection Issue”).99
According to the Applicants, this breach is a consequence of the primary violation of due
process consisting in denying them the right to be heard on the Minnotte factors.100
131. Having found that the Minnotte bar rendered all of the Claimants’ claims inadmissible, the
Tribunal concluded that it did not need to hear the Parties on the Infection Issue and
dismissed the case without admitting submissions on the validity of the Exploitation
Licences under Indonesian law. According to the Applicants, the Tribunal did so although
(i) the Infection Issue had been carved out from the document authenticity phase (in PO15
and PO20) on the common understanding that it would be addressed in a later phase of the
proceedings;101 (ii) the Claimants had pointed out that they considered the Infection Issue
95 Reply, para. 105. 96 Annulment Application, paras. 128-133. 97 Annulment Application, para. 129. 98 Annulment Application, para. 132. 99 Annulment Application, paras. 113-122; Reply, paras. 100, and 110-115; Tr. Day 1 [Sheppard] [67:24] to [69:7]. 100 Reply, para. 112. 101 Annulment Application, paras. 63-69, 115, and 118-121.
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as a “major” issue;102 and (iii) the importance of the Infection Issue had been “elevated”
following the Tribunal’s decision to exclude Mr. Noor’s evidence at the 2015 Hearing.103
The Applicants argue that, by its decision, the Tribunal deprived the Claimants of the
ability to make submissions (and provide expert evidence) on how their investments – the
Exploitation Licenses – would have a legal existence notwithstanding a finding of
forgery.104
132. Responding to the argument that nothing in PO13, PO15 or PO20 prevented them from
elaborating on the Infection Issue, the Applicants note that, throughout the document
authenticity phase, “they simply did not have a case to answer” on that issue, and the
significance of the Infection Issue was elevated by the exclusion of Mr. Noor’s evidence.105
e. Denial of justice
133. In their Reply, the Applicants claim that they were not given the opportunity to brief the
question of whether they suffered a denial of justice before the Indonesian courts.106
Specifically, according to the Applicants, the Tribunal denied them due process by
dismissing their denial of justice claim (without reasons and against a previous finding in
PO12) while the evidentiary record on it was “virtually non-existent,” due to the fact that
in PO15 the Tribunal had directed them not to submit at that stage evidence supporting
their claim or on why their claim could survive a finding of forgery.107
f. State responsibility
134. The Applicants allege that they were never given an opportunity to present a full case to
support their arguments on State responsibility.108 In particular, the Applicants argue that,
102 Annulment Application, para. 115. 103 Annulment Application, paras. 115, 116, and 63 (noting that without Mr. Noor’s witnessing that he was deceived
into signing the Exploitation Licenses, the State needed “the law to do the work that the facts could not do” and show
that, by operation of Indonesian law, the Exploitation Licenses were “infected” by the forgery of the general survey
and exploration licenses). 104 Annulment Application, para. 117. 105 Reply, para. 115. 106 Reply, para. 124. 107 Reply, para. 124. 108 Reply, paras. 87-89; Tr. Day 1 [Sheppard] [53:18] to [60:9].
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if allowed to do so, they could have provided “further evidence to demonstrate the full
scale of the State’s involvement in the fraudulent scheme that the Tribunal found,” and
developed arguments on how the “State-orchestrated fraud gives rise to substantive
liability” under international law.109 According to the Applicants, having found that
someone inside the Regency was likely complicit in the fraud, the Tribunal was required
to address the legal consequences of that finding on the State and on its objection to the
admissibility of the Claimants’ claims.110 In particular, the Applicants argue that, if the
Tribunal was to apply international law to the conduct of Churchill (as it purported to do
in applying Minnotte), it also should have applied the international law principles of State
responsibility enshrined in Article 7 of the International Law Commission Draft Articles
on Responsibility of States for Internationally Wrongful Acts (the “ILC Articles”).
According to the Applicants, the Tribunal’s one-sided application of general principles of
international law amounts to a breach of the Applicants’ right to be heard and an unequal
treatment of the Parties.111
135. According to the Applicants, the breach of their right to be heard had an impact on the
outcome of the Award because had the Tribunal applied the law of State responsibility and
found that the State was precluded from arguing Minnotte, there would not have been an
award but a decision to conclude the document authenticity phase, with directions for how
the State responsibility and other legal consequences should have been briefed in a
subsequent phase.112
ii. Article 52(1)(b) of the ICSID Convention: Manifest excess of powers
136. According to the Applicants, a failure to apply the proper law to the case may give ground
for annulment under Article 52(1)(b) of the ICSID Convention if it is “manifest” (meaning
“obvious, clear, easily recognizable” or “clearly capable of making a difference to the
result”).113 At the Hearing on Annulment, the Applicants clarified that ICSID committees
109 Reply, para. 88. 110 Tr. Day 1 [Sheppard] [53:18] to [53:24] and [60:4] to [60:9]. 111 Tr. Day 1 [Sheppard] [58:19] to [59:1]. 112 Reply, para. 89. 113 Annulment Application, paras. 134 and 135; see also Tr. Day 2 [Weeramantry] [7:15] to [7:22].
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have read the term “manifest” as meaning “easily perceived, obvious or flagrant, and
without requiring an outcome analysis,”114 and found that serious and obvious errors of
law may be relevant in the context of Article 52(1)(b).115
137. In their written submissions, the Applicants claim that the Tribunal manifestly exceeded
its powers because it failed to: (i) apply Indonesian Law to the Infection Issue,116 (ii) apply
the international law of State responsibility when deciding the case,117 and (iii) address the
Claimants’ unjust enrichment claim and apply the international law of unjust
enrichment.118
138. On point (i) above, the Applicants argue that, under Article 42(1) of the ICSID Convention,
the validity of the Exploitation Licences (which created property rights) was to be
determined under Indonesian law (being the law of the host State). The Applicants then
point to paragraph 530 of the Award, which expressly indicates that the Tribunal did not
apply Indonesian law to the Infection Issue, and argue that, by failing to apply the proper
law, the Tribunal manifestly exceeded its powers.119 The Applicants also argue that the
Tribunal would have exceeded its powers even if their claims were inadmissible due to the
Minnotte bar because, under Article 42 of the ICSID Convention, the Tribunal should have,
in any event, applied Indonesian law to determine whether there was a lacuna or a conflict
between local and international law.120
139. On issue (ii) above, the Applicants recall that, in the arbitration, they pointed out that, if
the fraud alleged by the State existed, the State’s own officials would be implicated, and
consequently “the State would be responsible for the criminal wrongdoing of its public
officials” pursuant to Article 7 of the ILC Articles.121 The Applicants further note that,
when the Tribunal introduced the Minnotte framework, they not only continued to argue
114 Tr. Day 2 [Weeramantry] [8:6] to [8:9]. 115 Tr. Day 2 [Weeramantry] [8:11] to [10:8]. 116 Annulment Application, paras. 136-146; Reply, paras. 69-86. 117 Annulment Application, paras. 147-158; Reply, paras. 116-119. 118 Annulment Application, paras. 159-167; Reply, para. 122. 119 Annulment Application, paras. 136-146; Reply, paras. 116-119. 120 Annulment Application, para. 146; Reply, paras. 117 and 118. 121 Annulment Application, paras. 148-155; Reply, paras. 69-74.
34
State responsibility but also submitted that, if State officials had facilitated the fraud and
forgery, the State could not rely on its own unlawful conduct to mount an admissibility
objection to the investors’ claims.122
140. The Applicants further note that in the Award (paragraph 476), the Tribunal found that “an
insider” had assisted Ridlatama in the fraud. However, despite finding that the State’s
officials had probably done wrong, the Award makes no mention of Article 7 of the ILC
Articles and the Claimants’ argument that an admissibility objection predicated on lack of
good faith cannot be made by a party that breached good faith itself.123 The Applicants
argue that, faced with the State’s admissions of criminal wrongdoing by its own senior
officials and the Applicants’ submissions on its legal consequences, the Tribunal’s
complete failure to engage on and apply the international law of State responsibility is
inexplicable and constitutes a manifest excess of power.124 The Applicants further note that
their arguments on State responsibility were potentially determinative in the legal
framework applied by the Tribunal to dismiss the Claimants’ case:125 if the Tribunal had
applied the law of State responsibility there would not have been a Minnotte bar at all.126
141. On point (iii) above, the Applicants reiterate that they took on significant risk in funding
general survey, exploration and exploitation activities in EKCP, investing approximately
USD 70 million.127 They further note that, thanks to their investments, the State learned of
the location of major natural resources and sources of revenue through the transfers of
intellectual property which had been generated for the EKCP.128 The Applicants also recall
that, in the arbitration, they argued that “illegality may operate as a defence to unjust
enrichment […] only where the illegal act was done by the party that brings the unjust
enrichment claim.”129 However, despite no finding of fraud or forgery attributable to the
Applicants themselves, the Tribunal did not address the Claimants’ unjust enrichment
claim130 and failed to apply the international law of unjust enrichment.
142. At the Hearing on Annulment, the Applicants also argued that the Tribunal manifestly
exceeded its powers by making a finding of inadmissibility outside the scope of its previous
directions in PO15 and PO20131 and by introducing a new legal framework (Minnotte),
whose factual foundation had not been part of the 2015 Hearing.132
iii. Article 52(1)(e) of the ICSID Convention: Failure to state reasons
143. According to the Applicants, a failure to state reasons occurs when a tribunal does not
address all of the parties’ arguments that were accepted as relevant for the decision or were
rejected but would have changed the decision, had they been accepted. The Applicants also
argue that a breach of Article 52(1)(e) of the ICSID Convention occurs if a tribunal fails to
address (or ignores) highly relevant evidence which had the potential to be relevant to the
outcome of the case, or if it provides reasons which are contradictory or frivolous.133
144. The Applicants argue that the Award is inconsistent as to whether Mr. Noor’s evidence
was disregarded. The Applicants point to paragraph 84 of the Award, which states that Mr.
Noor’s witness statement was disregarded, and argue that this statement is contradicted by
paragraphs 165 and 512 of the Award, whose wording (and similarity with the text of Mr.
Noor’s witness statement) shows that the Tribunal in reality considered Mr. Noor’s
evidence.134
145. The Applicants further claim that the Award failed to state the reasons for which:
a. The Tribunal readmitted (or did not disregard) Mr. Noor’s evidence (paragraphs
165 and 512);135
130 Annulment Application, paras. 159-167; Reply, para. 122. 131 Tr. Day 1 [Sheppard] [40:20] to [42:4] and Tr. Day 2 [Weeramantry] [10:9] to [11:17]. 132 Tr. Day 1 [Sheppard] [42:5] to [53:17] and Tr. Day 2 [Weeramantry] [10:9] to [11:17]. 133 Annulment Application, paras. 168-170. 134 Annulment Application, paras. 171-178; Reply, paras. 107-109. 135 Annulment Application, para. 179; Reply, paras. 107-109; Tr. Day 1 [Sheppard] [73:11] to [73:16].
36
b. The Tribunal concluded that the Infection Issue was moot (paragraph 530); in
particular, the Applicants argue that the Tribunal should have explained the reasons
why the Exploitation Licenses were invalid under Indonesian law and/or why
international law should override national law;136
c. The Tribunal found that the Applicants’ due diligence was defective (paragraph
504); in particular, according to the Applicants, the Tribunal failed to state the
benchmark against which it assessed their due diligence (which makes the Award
arbitrary on this point);137
d. The Tribunal reversed its order for the production of the Police Files (accepting the
Respondent’s argument on privilege) without drawing adverse inferences against
the State (paragraph 249);138
e. Their arguments on State responsibility were dismissed (paragraphs 529 and
530);139
f. Their unjust enrichment claim was dismissed (paragraphs 529 and 530) without
applying the three-step analytical enquiry of the Minnotte test set forth in paragraph
503;140
g. Their intellectual property claim was dismissed (paragraphs 529 and 530)
notwithstanding the argument that this claim would survive a finding of forgery;141
and
h. Their denial of justice claim was dismissed (paragraphs 529 and 530).142
136 Annulment Application, paras. 180-185; Reply, paras. 116-119; Tr. Day 1 [Sheppard] [73:17] to [74:5]. 137 Annulment Application, paras. 186-192; Tr. Day 1 [Sheppard] [72:7] to [72:19]. 138 Annulment Application, paras. 193-197. 139 Annulment Application, paras. 198 and 199; Tr. Day 1 [Sheppard] [72:20] to [73:10]. 140 Annulment Application, paras. 200-205; Reply, paras. 120 and 121. 141 Annulment Application, paras. 206-212. Reply, para. 123. 142 Annulment Application, paras. 213-217. Reply, para. 124.
37
146. At the Hearing on Annulment, the Applicants specified that the Tribunal failed to explain
the reasons for dismissing all of their alternative claims because it did not explain the nexus
between the Minnotte factors and each of these claims.143
147. During the first day of the Hearing on Annulment, the Applicants further argued that the
Tribunal failed to state the reasons for its finding in paragraph 508, namely that
international public policy was engaged on the facts it found.144 According to the
Applicants, the Tribunal created its own notion of international public policy without
proper reasoning and failed to explain why the Minnotte factors were part of the
international public policy (an argument which the Respondent never made) and how the
Claimants’ conduct amounted to deliberately or unreasonably ignoring fraud or forgery.145
According to the Applicants, while they were found guilty of lack of diligence, this is not
the same as a finding that they had unreasonably ignored fraud.146
THE RESPONDENT’S SUBMISSIONS
i. Article 52(1)(d) of the ICSID Convention: No serious departure from a
fundamental rule of procedure
148. The Respondent argues that Article 52(1)(d) of the ICSID Convention provides for a high
threshold for annulment, requiring both that the rule breached be “fundamental” and that
the breach be “serious.”147
149. The Respondent does not contest that a breach of the right to be heard and a clear violation
of a rule of evidence (such as the reversal of the burden of proof) may, in specific
circumstances, be relevant under Article 52(1)(d) of the ICSID Convention. The
Respondent however notes that the ICSID jurisprudence relied upon by the Applicants has
recognized that tribunals can choose the bases for their decisions without breaching the
parties’ right to be heard (provided that these bases fall within the legal framework of the
143 Tr. Day 1 [Sheppard] [74:6] to [74:25]. 144 Tr. Day 1 [Sheppard] [69:19] to [69:22]. 145 Tr. Day 1 [Sheppard] [69:19] to [72:6]. 146 Tr. Day 1 [Sheppard] [71:18] to [71:22]. 147 Counter-Memorial, paras. 125 and 126; see also paras. 127-144.
38
dispute and do not consist of issues that were not invoked, argued or anticipated by the
parties).148 The Respondent further notes that no award has ever been annulled due to a
reversal of the burden of proof, and that ICSID committees have found that a mere
disagreement or dissatisfaction with the tribunal’s evaluation of the evidence cannot be a
basis for finding a serious departure from a fundamental rule of procedure.149
150. The Respondent claims that, in order to be “serious,” a breach must have had a material
impact on the outcome of the award, meaning that it must have caused the tribunal to reach
a result substantially different from that it would have awarded had the rule been
observed.150
151. The Respondent further argues that no serious breach of due process occurred in the present
case because the Tribunal gave the Parties a full, fair and equal opportunity to present their
case (and produce evidence) and based the Award on a theory that the Parties had discussed
in the document authenticity phase.151
a. The Minnotte Direction
152. According to the Respondent, the Tribunal did not deny the Applicants the right to be heard
when it invited the Parties’ comments on Minnotte without authorizing the submission of
new evidence.152
153. The Respondent argues that the Minnotte Direction did not raise new issues outside of the
scope of the document authenticity phase as shaped by PO13, PO15 and PO20.153 In
particular, in the Respondent’s view, the Minnotte test was part of the State’s case
throughout the document authenticity phase,154 since both “due diligence” and “deliberate
closing of eyes” were factors encompassed in the broader concept of good faith that was at
148 Counter-Memorial, paras. 128-136. 149 Counter-Memorial, paras. 137-141. 150 Counter-Memorial, paras. 142-144. 151 Counter-Memorial, paras. 131 and 136. 152 Counter-Memorial, paras. 145-163; Rejoinder, paras. 13-75. 153 Counter-Memorial, paras. 104-109; Rejoinder, paras. 47-52. 154 Counter-Memorial, paras. 110-115, and para. 149; see also Annex A to the Counter-Memorial.
39
the basis of the Claimants’ defence to the Forgery Dismissal Application,155 and that was
addressed in the document authenticity phase as part of the “legal consequences” of
forgery.156 The Respondent argues that, in the document authenticity phase, the Applicants
submitted substantial evidence on their due diligence (on which they thereafter relied in
their briefs on Minnotte), and at no time did they indicate that they wished to submit
additional evidence (or seek leave to reopen the proceedings or supplement their
submissions).157 In the Respondent’s view, by the Minnotte Direction, the Tribunal simply
sought the Parties’ views on a legal authority that was not cited by them, but that was
consistent with other authorities on the record.158
154. According to the Respondent, the Applicants concede that, in the arbitration, they
submitted evidence regarding their good faith and the subsidiary issues of due diligence
and failure to perceive the fraud.159 The Respondent argues that the Applicants never
protested that they had made only a limited showing regarding the issue of due diligence.
Rather, they presented evidence allegedly confirming their extensive due diligence, the
Respondent rebutted this evidence and submitted evidence confirming that the Claimants
were either complicit or at least knew (or should have known) of the fraud. Based on the
evidence on the record, the Tribunal concluded that Ridlatama was the author of the forgery
and the fraud.160 According to the Respondent, the Applicants cannot now relitigate the
Tribunal’s factual finding.161
155. Furthermore, the Respondent argues that the Applicants’ proffer of Mr. Mazak’s testimony
is belated (as is their offer to submit expert testimony regarding the due diligence exercised
by a reasonable investor in the Indonesian mining sector) given that they could have called
Mr. Mazak as a witness in the arbitration (or presented expert witnesses) but chose not to
155 Rejoinder, paras. 47-65. 156 Rejoinder, paras. 49, 50, and 53. 157 Counter-Memorial, paras. 145, and 150-156; Rejoinder, paras. 53-65; see also paras. 66-75. 158 Rejoinder, para. 66. 159 Rejoinder, para. 54. 160 Rejoinder, paras. 54-57. 161 Rejoinder, para. 57.
40
do so.162 The Respondent further claims that Mr. Mazak’s testimony is duplicative and
partial, and the proposed expert testimony would not have been material to the outcome of
the case.163
156. In any case, according to the Respondent, the Minnotte factors (due diligence and closing
of the eyes) were not dispositive to the case as the Tribunal reached its finding on
inadmissibility based only on the seriousness and extent of the forgery, the general
principle of good faith and the prohibition of abuse of process.164 The Respondent further
argues that the Tribunal did not adopt (or decide based on) the Minnotte test (proposed by
the Claimants),165 and that the same finding would have been reached based on numerous
authorities relied upon by the Respondent.166
157. The Respondent further argues that the Minnotte Direction did not change the applicable
legal framework.167 The Respondent also claims that the Applicants not only argued that
the Minnotte Direction was within the analytical framework of the admissibility phase, but
also asserted that the evidentiary record in the arbitration established that they were good
faith investors under Minnotte. Since Churchill and Planet chose not to raise an objection
to the Minnotte Direction with the Tribunal, they have waived their right to raise this
objection as a ground for annulment.168
b. The re-admission of Mr. Noor’s evidence
158. The Respondent argues that the Tribunal did not readmit Mr. Noor’s witness statement and
that the Applicants misread the Award in connection to Mr. Noor’s evidence.169
159. The Respondent notes that, in paragraph 84 of the Award, the Tribunal expressly stated
that it disregarded Mr. Noor’s witness statement. The reference to Mr. Noor’s testimony in
ARTICLE 52(1)(D) OF THE ICSID CONVENTION: SERIOUS DEPARTURE FROM A
FUNDAMENTAL RULE OF PROCEDURE
177. There is no question that ‘equal treatment of the parties’ and ‘the right to be heard’ are both
fundamental rules of procedure which are part and parcel of the right to a fair trial, and the
Parties also agree that the ‘burden of proof’ may constitute another fundamental rule of
procedure for purposes of Article 52(1)(d) of the ICSID Convention. For the most part,
however, the Parties’ dispute does not turn on how these fundamental rules are interpreted
as a matter of theory, but rather how they were applied by the Tribunal on the specific facts
of this case. The only area in which there appeared to be some difference at the level of
theory is with respect to the scope of the right to be heard. At the Hearing on Annulment,
the Committee asked the Parties in particular whether for purposes of the ICSID
Convention the standard should be seen as requiring a “full opportunity” or simply a
“reasonable opportunity” to be heard, bearing in mind the shift in Article 17 of the
UNCITRAL Arbitration Rules from the former to the latter.224 In the Applicants’ view, the
scope of the right to be heard within both the UNCITRAL and ICSID systems must be
understood at the fuller end of the scale, namely as ensuring a full opportunity for the
parties to present their case.225 According to the Respondent, the expression “full
opportunity” indicates that a party must be granted a “reasonable opportunity” to be heard,
and not that a party is entitled to present as many arguments and much evidence as it sees
fit.226 In any case, in the Respondent’s view, even if the two standards were different, both
tests would be met in this case as the Applicants had a “genuine opportunity to be heard”
during the arbitration.227
223 Counter-Memorial, paras. 254-257; Rejoinder, para. 120. 224 Article 17 of UNCITRAL Arbitration Rules as revised in 2010; Tr. Day 1 [Kalicki] [196:25] to [197:21]. 225 Tr. Day 2 [Luttrell] [37:19] to [45:4]. 226 Tr. Day 2 [Frutos Peterson] [72:11] to [74:18]. 227 Tr. Day 2 [Frutos Peterson] [73:14] to [73:16].
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178. In the view of this Committee, Article 52(1)(d) of the ICSID Convention does not stand
alone but can be interpreted in light of other sources. This includes Article 17 of the 2010
UNCITRAL Arbitration Rules, which contains a principle which reflects a general
standard.228 In any case, the principle of “full opportunity” to be heard, which is favoured
by the Applicants, would still need to be interpreted reasonably, namely as requiring
tribunals to provide each party with an adequate opportunity to be heard but not necessarily
with an unlimited opportunity to present its case. In this perspective, the right to be heard
is commonly considered as not absolute, but rather subject to possible limitations, provided
that they are reasonable and proportional to the aim to be achieved.
179. The Committee also notes that the ad hoc Committee in Fraport v. Philippines (“Fraport”)
referred to international human rights instruments as a source of content of the right to be
heard, and recalled that international courts have found that the right to present one’s case
“require[s] the tribunal to afford both parties the opportunity to make submissions where
new evidence is received and considered by the tribunal to be relevant to its final
deliberations.”229 Even if ad hoc committees operate within the ICSID Convention, the
reference to the jurisprudence of specialized courts which are an integral part of human
rights treaties fosters the consistency of the content of the right to be heard and strengthens
the effectiveness of this concept. It also enhances the legitimacy of the interpretation by
linking it to the broader body of international law. The substance of the right to be heard
has been described in terms that are commonly accepted by the ad hoc committee in Wena
v. Egypt (“Wena”):
[Article 52(1)(d) of the ICSID Convention] refers to a set of
minimal standards of procedure to be respected as a matter
of international law. It is fundamental, as a matter of
procedure, that each party is given the right to be heard
before an independent and impartial tribunal. This includes
the right to state its claim or its defense and to produce all
arguments and evidence in support of it. This fundamental
right has to be ensured on an equal level, in a way that allows
228 Tr. Day 1 [Kalicki] [196:25] to [197:21]; Tr. Day 2 [Luttrell] [37:19] to [45:25]. 229 Fraport AG Frankfurt Airport Services Worldwide v. Republic of the Philippines (ICSID Case No. ARB/03/25),
Decision on Annulment, December 23, 2010, para. 202 (Exhibit ALA-08).
51
each party to respond adequately to the arguments and
evidence presented by the other.230
180. With this understanding of the right to be heard, the Committee also observes that Article
52(1)(d) of the ICSID Convention requires a “serious departure” from that right. The
Committee agrees with the ad hoc committee in Mine v. Guinea that under this formulation,
“the departure must be substantial and be such as to deprive a party of the benefit of the
protection which the rule was intended to provide”231. In the context of the right to be heard,
however, this does not require a finding that the deprivation of the right necessarily led to
a different outcome in the case. Article 52(1)(d) provides a remedy for procedural injustice
that can be triggered for a material breach. The right to be heard guarantees participation
in the administration of evidence, irrespective of the Applicant’s chances of obtaining a
different result. The test turns on the fundamental nature of the rule of procedure and the
seriousness of its violation. A grave violation of a fundamental rule is likely to more or less
automatically result in an injury, inasmuch as such party is deprived of the due process
protections which the rule is intended to provide.
i. The Minnotte Direction
181. As a threshold issue, the Respondent contends that, in accordance with Arbitration Rule
27, the Applicants are estopped from raising any impropriety pertaining to the Minnotte
Direction as they failed to raise any objection with the Tribunal that Minnotte raised issues
that were outside the scope of the document authenticity phase.232 The Applicants stress
that the impropriety arose not from the Tribunal’s invitation to comment on Minnotte, but
from ignoring their protest that further evidence would be needed and disposing of the
claims without giving them an opportunity to present their case on the facts relevant to the
Minnotte test.233
230 Wena Hotels Limited v. Arab Republic of Egypt (ICSID Case No. ARB/98/4), Decision on Annulment, December
8, 2000, para. 57 (RLA-ANN-288). 231 Maritime International Nominees Establishment v. Republic of Guinea (ICSID Case No. ARB/84/4), Decision on
182. The ad hoc Committee in Fraport recognized that Arbitration Rule 27 on waiver to object
illustrates a more general rule, common to all award control systems, that a party forfeits
its right to seek annulment if it has failed to raise promptly its objection to the tribunal’s
procedure upon becoming aware of it.234 The Committee notes that Churchill and Planet
discussed the Minnotte invitation without objection in the first place, but this fact cannot
be taken as a waiver of their right to try to demonstrate later that the Tribunal committed
annullable error in the particular way it ultimately applied the Minnotte factors in its
Award, to support a decision of inadmissibility. In their reply submission on Minnotte of
October 11, 2016, Churchill and Planet did declare that the Respondent had changed its
case multiple times over the two previous years, and that they had been dragged with the
Tribunal further and further off the course charted in PO15.235 Moreover, the Applicants
had made an early, albeit unsuccessful, complaint about the management of the document
authenticity phase, when they objected that PO13 violated their fundamental due process
rights and constituted unequal treatment of the Parties.236 For these reasons, the Committee
accepts that the Applicants are not barred from challenging the Award under Article
52(1)(d) of the ICSID Convention.237
183. In the course of its deliberations after the 2015 Hearing, the Tribunal issued the Minnotte
Direction instructing the Parties to comment on specific points of international law arising
out of this authority, but only on the basis of the evidence in the record and subject to a 15-
page limit. These specific points were identified as follows:
(i) the admissibility in international law of claims tainted by
fraud or forgery where the alleged perpetrator is a third
party, (ii) the lack of due care or negligence of the investor
to investigate the factual circumstances surrounding the
234 Fraport AG Frankfurt Airport Services Worldwide v. Republic of the Philippines (ICSID Case No. ARB/03/25),
Decision on Annulment, December 23, 2010, paras. 204-208 (Exhibit ALA-08). 235 Exhibit A-44, para. 4. 236 “It is patently violative of Claimants’ right to due process for the Tribunal to reopen a decided issue on the merits
without notifying the Claimants of its intention to do so, or inviting Claimants to address the substance of that issue,”
Exhibit A-12, p. 13. 237 The Committee notes that, at the end of the 2015 Hearing, following the President’s statement that “this is the time
to complain about the conduct of this arbitration”, the Parties confirmed that they had no complaints. In the
Committee’s view, the Applicants’ statement must be interpreted as an expression of satisfaction about the way the
2015 Hearing was conducted and not as an abandonment of their grievances (Exhibit A-34, [Kaufmann-Kohler]
[221:3] to [221:13]).
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making of an investment, and (iii) the deliberate closing of
the eyes to indications of serious misconduct or crime, or an
unreasonable failure to perceive such indications.238
184. As mentioned above, Churchill and Planet declared in their reply submissions of October
11, 2016 on Minnotte that the Respondent’s motion no longer could be labelled as a mere
admissibility challenge, but had evolved to become “an omnibus objection comprising
elements of jurisdiction, liability and quantum, underpinned by baseless allegations of
forgery, fraud, and corruption; bad faith; misconduct on foreign stock exchanges; and
misleading and deceptive behaviour by the Claimants and their counsel.”239 In support of
this statement, Churchill and Planet referred to all of the State’s post-hearing
submissions,240 including but not limited to the State’s submission of September 27, 2016
on Minnotte.241 They concluded that the Parties were now debating factual and legal issues
well outside the intended scope of the document authenticity phase, and the volume and
nature of these issues were such “that they can only be properly briefed, investigated and
determined in a full merits phase.”242
185. Directions made within its discretion by an arbitral tribunal regarding the scope and
admission of evidence have an impact on the discharge of the burden of proof. The
Applicants essentially argue that the Tribunal limited the Parties to the old factual record243
when the Minnotte factors, due care and deliberate closing of the eyes, were determinative
of the outcome of the Award. In their view, it was thus unfair to hold them to the existing
record when the Tribunal entered into a factual inquiry that had never been part of the
document authenticity phase.244 Notwithstanding the Applicants’ contention that the
Tribunal exercised its power in a manner that limited their freedom of action, the
Committee finds that the Applicants could present their case on the Minnotte factors
238 Exhibit A-41, p. 2. 239 Exhibit A-44, para. 1. 240 Exhibit A-44, fn. 2-8. 241 Exhibit A-43. 242 Exhibit A-44, para. 4. 243 Tr. Day 1 [Sheppard] [48:5] to [48:10]. 244 Tr. Day 1 [Sheppard] [39:17] to [39:19].
54
without their right to produce evidence in support of their contentions have been impaired
as will be now examined.
186. The Applicants contend that the State’s Forgery Dismissal Application made no mention
of due diligence or willful blindness and that, throughout the arbitration, the State had
repeatedly contended that the state of mind and good faith of the Claimants were not
relevant.245 The Applicants further contend that the Parties did not file evidence, which
they contend was critical, on the due diligence practice of investors in the Indonesian
mining sector in 2006-2010. They admit that they nonetheless did present arguments on
due diligence, but allege that these were made for different purposes than addressing the
Minnotte factors, including in support of their claim for estoppel based on the State’s
alleged recognition of the validity of the disputed licenses.246 However, the Applicants
cannot object belatedly to the Tribunal’s evaluation of the evidence they presented on the
basis that they now wish they might have submitted more. The fact that Churchill and
Planet did submit evidence and arguments on due care reflects the fact that they evidently
had the opportunity to do so.
187. Pleadings cannot be ignored in deciding whether a party has been able to discharge the
burden of proof. In their first submission on Minnotte of September 23, 2016, Churchill
and Planet discussed the issue of due diligence in the factual circumstances surrounding
the making of the investments. They declared that the scope of due diligence is a matter
for the business concerned and that, where the level of due diligence is at issue, the
appropriate measure must be what a reasonably prudent investor would do in the
circumstances. Here, they said, the record showed that they conducted extensive due
diligence on their investments, both prior to making those investments and during the
course of their operation and, in contrast to the investors in Minnotte, they were active and
visible on the ground. They added, however, that forged signatures were not a foreseeable
risk when they made their investments.247
245 Reply, para. 5. 246 Tr. Day 1 [Sheppard] [48:8] to [49:7]; Annulment Application, paras. 89-91; see also Exhibit A-26(1), paras. 126-
131. 247 Exhibit A-42, paras. 11, 12, and 16.
55
188. The Applicants contend that, in the arbitration record, there was virtually no evidence as
to the second factor (deliberate closing of eyes) given that this factor had not been relevant
in the document authenticity phase.248 However, the Award evaluates the standard of
“willful blindness” (or deliberate closing of the eyes) by focusing on the level of
institutional control and oversight exercised by Churchill and Planet in relation to the
licensing process, whether they were put on notice by evidence of fraud that a reasonable
investor in the Indonesian mining sector should have investigated, and whether or not they
took the appropriate corrective steps.249 The Tribunal held that, in light of the heightened
degree of diligence that one would expect of an investor in the risky coal mining
environment in Indonesia, of which the Claimants were aware, there was evidence on
record confirming that Churchill and Planet had not verified the representations made by
Ridlatama; that, notably, no one performed any oversight function of the licensing process;
that the Claimants failed to exercise due diligence when indications of forgery first came
to light in the BPK 2009 public audit report; and that verification of the Ridlatama licenses
by the Indonesian law firm of STP, which was hired to conduct due diligence, did not assess
the authenticity of the signatures.250 In reaching these conclusions, the Tribunal attached
to the evidence on record the probative value it believed that evidence deserved. Questions
relating to the evaluation of evidence are subject to the primacy of the arbitrators’ judgment
and are not reviewable by ad hoc committees under Article 52 of the ICSID Convention.
189. The Applicants add that good faith is the operative principle in the Minnotte test in
connection with the admissibility in international law of claims tainted by fraud or
forgery.251 However, they say, any evidence on good faith was excluded by the Tribunal in
PO15 when it made clear that the facts allegedly justifying estoppel were not to be
addressed during the document authenticity phase.252 It is trite law that, in order to exercise
its fact-finding power, a tribunal may request the parties to produce documents or provide
248 Tr. Day 1 [Sheppard] [49:18] to [49:22]. 249 Award, para. 504. 250 Award, paras. 517-527. 251 Reply, para. 37; see Exhibit A-42, paras. 2-7. 252 Reply, para. 37; see Exhibit A-16, paras. 34 and 35.
56
explanations or use expert opinions. Contrary to what the Applicants allege,253 the Tribunal
did not have to allow new evidence on the standards of due diligence of a reasonable
investor in the Indonesian mining sector or to determine the factual aspects of Minnotte in
a subsequent phase or with the merits. The Tribunal found in the record what it believed to
be sufficient evidence of Churchill and Planet’s absence of diligence. True, before the
Minnotte direction, the evidence on record could not be used in support of the specific
inquiries raised in there by the Tribunal, but this is precisely the reason why the Tribunal,
respectful of the Parties’ rights of defense, consulted them on Minnotte and asked them to
use the evidence in the record if they wished to refer to facts in addressing the Tribunal’s
questions. The Applicants have not demonstrated that the Tribunal’s use of its authority to
investigate the facts and weigh the evidence flouted the equality of the Parties or their right
to present their defenses. Allegations that the Tribunal’s approach was driven by a concern
about further delaying its deliberations after a year already had expired since the 2015
Hearing, or by embarrassment at the prospect of reopening the document authenticity phase
to take new evidence on the Minnotte factors which would have shown its earlier scoping
of this phase to have been flawed,254 are unfounded assumptions on the part of the
Applicants.
190. The Applicants now suggest that there is “a raft of witness and documentary evidence” that
they could have adduced but did not, principally including the testimony of Mr. Mazak,
then managing director of Churchill.255 In their reply submission on Minnotte of October
11, 2016, Churchill and Planet objected that the State had raised fresh allegations of bad
faith and forgery against them and Mr. Mazak despite giving no indication prior to the 2015
Hearing that it had questions for Mr. Mazak; they labelled this approach “prosecutor
ambush.”256 Churchill and Planet had not presented Mr. Mazak as a witness, the Award
notes, “since they offered the most appropriate witnesses to respond to Indonesia’s case on
authenticity as it stood prior to the hearing, i.e. that the Claimants were dupes fooled by
Ridlatama, not that they were fraudsters as Indonesia now contends.”257 The Committee
notes that, even after Churchill and Planet (prior to the 2015 Hearing, in their reply to the
Forgery Dismissal Application) described the State’s case as one alleging fraud rather than
forgery,258 they still did not present Mr. Mazak as witness to rebut these allegations,
notwithstanding every opportunity they had to do so. In these circumstances, the
Applicants may not posit at the annulment stage an alternate factual record which might
have existed, composed of evidence which could have been – but was not – submitted to
the Tribunal for consideration.
191. The Applicants also allege that the Minnotte Direction changed the legal framework of the
document authenticity phase, which the Tribunal managed in a way that was the source of
many annullable errors.259 The Applicants declare that the Tribunal failed to define the
expression “legal consequences” that first appeared in PO13, which reconsidered PO12
and decided to address document authenticity issues as a matter of priority.260
192. The Tribunal remarked in PO13 that Churchill and Planet, although twice invited to do
so,261 had chosen not to address the question about the fate of their claims in case of a
finding of forgery.262 The Tribunal determined that the issue of the document authenticity
should be addressed as a preliminary matter and “that, in the context of the document
authenticity phase, the Parties are to address in their written submissions and at the hearing
all factual aspects relating to forgery as well as the legal consequences of a finding of
forgery on each claim.”263 The Tribunal added that these directions did “not mean to
prevent the Parties from addressing any other matters which they deem appropriate in
connection with the forgery allegations and arguments.”264 Churchill and Planet applied
for reconsideration on November 23, 2014 on the grounds that PO13 violated their
257 Award, para. 206. 258 Exhibit A-26(1), para. 10. 259 Reply, paras. 40-47. 260 Annulment Application, paras. 52-62; see also Exhibit A-8, paras. 47, 49, 50, and 52. 261 Exhibits A-7 (Telephone conference of the Tribunal with the Parties of October 21, 2014) and A-10 (Churchill and
Planet’s letter of November 10, 2014 to the Tribunal). 262 Exhibit A-11, para. 26. 263 Exhibit A-11, paras. 27, 28, and 33. 264 Exhibit A-11, para. 28.
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fundamental due process rights and constituted unequal treatment of the Parties.265 On
January 12, 2015, the Tribunal rejected their request in PO15, and reaffirmed PO13 on the
scope of the authenticity phase:
as comprising (i) the factual aspects of forgery and (ii) the
legal consequences of a finding of forgery. Accordingly, the
document authenticity phase was defined as being limited to
(i) the factual question whether the impugned documents are
authentic or not (including especially who signed the
documents and how) and (ii) legal submissions on the
positions in law in a scenario where there would be forgery
(including for instance the legal requirements for estoppel,
as opposed to the facts allegedly justifying a finding of
estoppel).266
193. In PO15, the Tribunal stated that it considered that it had “fully respected the Claimants’
due process rights in connection with the issuance of PO13, by giving the Claimants an
opportunity to be heard, which […] was not subject to any limitation as to its scope,” and that
Churchill and Planet had limited their comments to a mention of estoppel and of their right
to recover amounts invested in good faith.267
194. “Legal consequences” were again considered at the end of the 2015 Hearing on certain
procedural aspects of the questions to be addressed in post-hearing briefs. The President
explained that:
[t]he point for asking legal consequences, which was a kind
of add-on to the factual authenticity question, was that we
heard very divergent views from the parties […] So that is
why we wanted you to canvas the legal consequences so we
could see where we were going if we have no authenticity,
or we have authentic documents.268
265 “It is patently violative of Claimants’ right to due process for the Tribunal to reopen a decided issue on the merits
without notifying the Claimants of its intention to do so, or inviting Claimants to address the substance of that issue,”
in the record supported Churchill’s “Bad Faith Authorization Theory,”310 which speculated
that Indonesian officials may have intentionally accepted documents they knew to be
forged as part of a scheme to reap the benefits of foreign investment while preserving an
ability to repudiate the licenses if that later proved convenient. These two findings are not
inconsistent, and the Tribunal was within its power to make both findings based on the
record before it, without thereby “reversing” any burdens of proof.
219. The Applicants also question the Tribunal’s decision not to draw an adverse influence of
complicity from the non-appearance of Mr. Noor. The State explained at the 2015 Hearing
that Mr. Noor was now a private citizen residing in Australia, over whom the Government
had no control. Indonesia declared that it had informed Mr. Noor about the 2015 Hearing
and believed until the last moment that he would be attending, when he communicated that,
because of travelling engagements, he could not participate.311 The Tribunal obviously
could not have foreseen the later press report after the Award, citing Mr. Noor’s statement
that “[w]e won an arbitration dispute in an international tribunal. This is proof of our
sovereignty over the management of Indonesia’s natural resources,”312 and therefore could
not have considered this in evaluating Indonesia’s contention at the time that neither it nor
the Tribunal could compel him to attend the 2015 Hearing.
220. In any event, whatever the Tribunal may have felt about Indonesia’s explanation for
Mr. Noor’s absence, it evidently considered the circumstances sufficient to strike his
witness statement, but insufficient to support the further relief of an adverse inference about
his complicity in the underlying illegality, in the absence of other evidence to that effect.
This was within its discretion to conclude: while adverse inferences are tools available for
tribunals to deter parties from refusing to comply with their orders about the production of
evidence, nothing requires that a tribunal grant such inferences. Moreover, the Tribunal
evidently considered it unnecessary to apply the sanction of adverse inferences, when, as
310 Award, paras. 459 and 476. 311 Exhibit A-29, pp. 1, 2, 6 and 7. 312 Exhibit A-46.
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noted above, it was able to base its finding that the forgeries and fraud created an
environment of apparent legality on evidence other than Mr. Noor’s.
221. Finally, the Applicants cannot demonstrate annullable error on the basis of the Tribunal’s
failure to draw adverse inferences in response to Indonesia’s non-production of the police
report into the alleged forgeries. The Tribunal weighed these reasons.313 As discussed
above, tribunals have discretion to draw adverse inferences when a party declines to
produce certain evidence, but they have no obligation to do so. In the Committee’s view,
it was not unreasonable for the Tribunal to find that drawing an adverse influence was not
the appropriate solution in response to Indonesia’s stated constraints based on the secrecy
of criminal investigations.
iv. The Infection Issue
222. The Applicants describe the Infection Issue as one of two questions (the other being the
issue of their reasonable reliance on Ridlatama) as to which there remained procedural
uncertainty after the 2015 Hearing, because of the Tribunal’s failure to define the scope of
the “legal consequences” of a finding of forgery that the Tribunal had directed be addressed
in the document authenticity phase.314 The Respondent contends that the Applicants have
waived any argument that they were denied the right to be heard on the Infection Issue
because they had every opportunity to present evidence on Indonesian law on that issue.315
As the State points out,316 the Parties discussed the validity of the Exploitation Licenses on
the occasion of the reconsideration of PO13.317 However, the Applicants’ grievance is
essentially that the proceedings of the document authenticity phase developed after PO13,
which was affirmed by PO15, in a manner that ruled out any possibility of addressing the
Infection Issue before the Award, despite their having stressed their perceived importance
of the issue at the end of the 2015 Hearing.318 Moreover, Churchill and Planet did object
313 Award, para. 250. 314 Annulment Application, para. 57. 315 Rejoinder, para. 99. 316 Counter-Memorial, para. 120. 317 Exhibit A-12, pp. 10 and 11; Exhibit A-13, pp. 13-16. 318 “That would be a major, major issue, not something that’s addressed in post-hearing briefs after an authenticity
hearing” (Exhibit A-34, [Sheppard] [213:18] to [213:20]). See Annulment Application, para. 115.
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to PO13 in the underlying proceedings.319 In these circumstances, they cannot be deemed
to have waived the possibility to challenge the Award on Article 52(1)(d) grounds, with
respect to PO13 or other procedural steps taken thereafter in the ensuing proceedings.320
223. The Tribunal indicated that PO20, paragraph 5, confirmed PO15, paragraph 34, and PO13,
paragraph 28321 on the scope of the authenticity phase and of the Award. The Applicants
interpret PO20, which, at paragraph 5, clarified that the term “legal consequences” of a
finding of forgery “does not cover the effect of the possible invalidity of the survey and
exploration licenses on the exploitation licenses,”322 as an indication that the Infection Issue
was reserved for subsequent consideration.323 In both their post-hearing briefs, Churchill
and Planet, in answering PO20 question e) (“[s]ubject to paragraph 5 above, in the event
that the signatures on (i) the survey and exploration licences […] are not handwritten or
not authorized, what would be the legal consequences on each Party’s case?”), declared
that the State had not explained why, as a matter of Indonesian law, it was necessary to
have valid survey and exploration licenses to obtain valid exploitation licenses.324 The
Applicants reiterated in their first submission of September 23, 2016 on Minnotte that the
Tribunal still had not heard evidence on Indonesian law as to how the Exploitation Licenses
had been infected by the invalidity of the underlying survey and exploration licenses.325
224. Even if, as alleged by Churchill and Planet, the President of the Tribunal agreed with them
about the Infection Issue at the 2015 Hearing that “these are delicate issues and we’re very
much aware of this,”326 the Tribunal thereafter decided in the Award that its inadmissibility
conclusion:
is within the scope of the present arbitration as it was
circumscribed in Procedural Orders Nos. 13, 15 and 20. In
this context, the Tribunal notes in particular that it arrived at
319 Annulment Application, para. 120. 320 Exhibit A-12, pp. 12-14. 321 Award, para. 232. 322 Exhibit A-35, para. 5. 323 Annulment Application, paras. 57 and 66-68. 324 Exhibit A-36(1), paras. 57-59; Exhibit A-38, para. 26. 325 Exhibit A-42, para. 6; Tr. Day 1 [Luttrell] [162:23] to [163:19]. 326 Exhibit A-34, [Kaufmann-Kohler] [211:14] to [211:15].
73
this outcome without there being a need to address the
validity of the Exploitation Licenses as a matter of
Indonesian law.327
225. The Committee does not accept the Applicants’ contention that the inadmissibility
conclusion is the result of a confluence of annullable errors, including denial of the right
to be heard, on the Infection Issue.328 Because there was no violation of due process on the
Minnotte factors, the Committee concludes that, even if Churchill and Planet were unable,
as they declare, to present evidence before the Award on Indonesian law regarding the
Infection Issue – and even if they expected to be able to do so in a subsequent phase of the
proceedings – this alleged violation is immaterial. The Tribunal did not decide the
substance of the Infection Issue; rather, it held that the issue was irrelevant given the
Tribunal’s overarching finding about inadmissibility of the claims under international law.
Specifically, the Tribunal explained that “[t]he accumulation of forgeries both before the
and after the Exploitation Licenses show that, irrespective of their lawfulness under local
law, the entire EKCP was fraudulent, thereby triggering the inadmissibility of the claims
under international law.”329 As the Tribunal thus decided the case on grounds for which
evidence of Indonesian law was not needed, there could be no violation of the right to be
heard by its not first allowing submissions on the subject it deemed unnecessary to its
decision.
v. Denial of justice
226. The same conclusion applies to the Applicants’ complaint that they were never given a
chance to brief the question of whether they suffered a denial of justice in the hands of the
Indonesian judicial system, which they characterize as simply dismissed in limine.330 The
Tribunal decided that it could dispense with ruling on this claim, because like Churchill
and Planet’s other claims, it was tainted as a consequence of the fraudulent nature of the
EKCP to which it related.331 Given the Tribunal’s findings about the inadmissibility of the
whether he was defrauded in doing so, to a purely legal question of Indonesian law, namely
whether the Exploitation Licenses perfected previous flaws in the licensing chain.336 They
note that the Tribunal however did not apply Indonesian law to this issue. The Applicants
also object that the Tribunal did not apply the law of State responsibility to consider
whether alleged complicity by State officials should bar the Respondent from asserting
admissibility objections, and did not consider whether illegalities likely attributable to a
third party (Ridlatama) rather to the Claimants could bar them from proceeding with their
unjust enrichment claim, seeking return of the USD 70 million invested in EKCP. The
Applicants conclude that in each of these says, the Tribunal manifestly exceeded its powers
to decide the dispute in accordance with the applicable law under Article 42 of the ICSID
Convention, which the Tribunal determined in general to be the BITs, Indonesian law and
international law.337
231. Article 42(1) of the ICSID Convention, which is one of the provisions in Section 3 relating
to the powers and functions of the tribunal, requires the tribunal:
to decide a dispute in accordance with such rules of law as
may be agreed by the parties. In the absence of such
agreement, the Tribunal shall apply the law of the
Contracting State party to the dispute (including its rules on
the conflict of laws) and such rules of international law as
may be applicable.
The discretion accorded to tribunals under Article 42(1) of the ICSID Convention when
determining the applicable rules of law does not square with an extensive power of ad hoc
committees to check the determination, application and content of the law applied by the
tribunals. This has been recognized, with a few exceptions,338 by ad hoc committees.339
336 Annulment Application, para. 75. 337 Award, paras. 234-236. 338 Decisions on Annulment in Sempra Energy International v. Argentine Republic (ICSID Case No. ARB/02/16),
June 29, 2010 (Exhibit RLA-ANN-331) and Enron Creditors Recovery Corporation (formerly Enron Corporation)
and Ponderosa Assets, L.P. v. Argentine Republic (ICSID Case No. ARB/01/3), July 30, 2010 (Exhibit RLA-ANN-
287). 339 Updated Background Paper on Annulment for the Administrative Council of ICSID, May 5, 2016 (RLA-ANN-
277).
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232. As noted above, the Award decides that:
inadmissibility applies to all the claims raised in this
arbitration, because the entire EKCP project is an illegal
enterprise affected by multiple forgeries and all claims relate
to the EKCP. This is further supported by the Claimants’
lack of diligence in carrying out their investment.340
233. The Award consequently did not decide the Infection Issue (“without there being a need to
address the validity of the Exploitation Licenses as a matter of Indonesian law”),341 nor the
Claimant’s “substitute claims” (including unjust enrichment),342 because, finding the entire
investment to be fatally tainted by use of forgery, it considered all claims relating to that
investment to be inadmissible as a matter of international law.343 This is not a failure to
apply Indonesian law after having first found it to be applicable to a particular issue, but
rather a decision that Indonesian law was not applicable in this context, given the
Tribunal’s view of an overarching international law principle. The same is true for the
Applicants’ alternative argument that the Tribunal manifestly exceeded its powers because
it still should have examined Indonesian law to determine whether there was a lacuna or
conflict between local and international law. Under the guise of an argument based on a
manifest excess of powers, this criticism seeks to challenge the Tribunal’s core decision on
applicable law, which is not reviewable by the Committee according to Article 52 of the
ICSID Convention.
234. With respect to the issue of State responsibility, the Applicants contend that had the
Tribunal applied Article 7 of the ILC Articles or decided to reserve its decision on State
responsibility, their claims would have survived, because assistance of a State official in
Ridlatama’s scheme would be attributable to the State, and would have barred it from
succeeding on an inadmissibility objection predicated on the investment’s illegality. The
Applicants assert in addition that if one or more State officials had facilitated the fraud and
forgery, then the Minnotte analysis could not have resulted in dismissal, because the State
340 Award, para. 529. 341 Award, para. 530. 342 Exhibits A-06, p. 3; A-10, p. 3; A-12, p. 10; A-14, pp. 14-16; A-26(1), paras. 219-221; A-38, para. 27. 343 Award, para. 531.
78
could not rely on inadequate due diligence by the Claimants to support an admissibility
objection in circumstances of its own complicity. According to the Applicants, the Tribunal
therefore should have addressed and applied the international law on State responsibility,
before reaching its ultimate decision on admissibility.
235. The Committee is not insensitive to the question of whether, and to what extent, the
widespread scheme of forgery might have involved the support of one or more State
officials. However, it was for the Tribunal, and not the Committee, to determine the
relevance of this issue. The Tribunal concluded that the widescale use of forgeries to obtain
EKCP licenses rendered any claims for interference with the EKCP investment
inadmissible, as a fundamental matter of international law. Although the Tribunal did not
expressly discuss in this context the implications of its finding about the involvement of a
Regency insider, evidently the Tribunal did not consider that finding sufficient for it to
ignore the sweeping illegalities on which it found the entire EKCP investment to have been
based. In this sense the Tribunal appears to have implicitly considered issues of
comparative responsibility and rejected the Applicants’ arguments in this regard. The
Committee views the Applicants’ insistence that the Tribunal nevertheless should have
addressed the State responsibility arguments expressly rather than by implication, as
essentially a challenge to the Tribunal’s approach to admissibility. This is not within the
Committee’s remit to entertain. A finding of inadmissibility is not a manifest excess of
powers, and based on the Tribunal’s approach to inadmissibility, there was no requirement
that it go further to expressly apply doctrines of State responsibility or Article 7 of the ILC
Articles.
236. The same answer must be made to the Applicants’ further contention that the Tribunal
exceeded its powers by not addressing their argument in the arbitration that illegality may
operate as a defence to unjust enrichment only where the illegal act was done by the party
that brings the unjust enrichment claim, and not by an associated party. While it is true that
the Tribunal made no finding of fraud or forgery on the part of Churchill and Planet
themselves, it also found that “the seriousness, sophistication and scope of the scheme are
79
such that the fraud taints the entirety of the Claimants’ investment in EKCP,”344 and that
since “all claims relate to the EKCP,” the Claimants accordingly could not avail themselves
of the BITs to pursue any claims related to “the entire EKCP,” which it deemed “an illegal
enterprise affected by multiple forgeries.”345 This finding was made in application of what
the Tribunal found to be the proper law. Under the cloak of an argument based on the
violation of the manifest excess of powers, the Applicants more generally seek here an
impermissible challenge to the decision made by the Tribunal.
237. Under the same head of Article 52 of the ICSID Convention, Churchill and Planet at the
Hearing on Annulment further criticized the Tribunal for exceeding the scope of the task it
fixed with its own orders.346 According to the Applicants, the Tribunal made a finding on
inadmissibility which was outside the scope of the document authenticity phase, excluded
all issues of factual inquiry going to other legal issues such as estoppel, as well as
submissions on the Infection Issue, but nevertheless based its decision on inadmissibility
on facts revolving around the Minnotte question,347 and relied on principles of good faith
and international law as a basis for finding the claims inadmissible, without first making
clear that such issues had been included in the scoping of the phase pursuant to PO15 and
PO20, or considering the impact of the President’s statement at the end of the 2015 Hearing
that international law was excluded from the scope of the post-hearing briefs.348
238. As discussed above, PO15 noted that the facts in support of the Claimants’ estoppel
arguments overlapped with the facts of their expropriation and fair and equitable treatment
claims, but that overlapping facts were not meant to be part of the bifurcated issues. PO15
also clarified PO13 with regard to the scope of the authenticity phase, as including “legal
submissions on the positions in law in a scenario where there would be forgery (including
for instance the legal requirements for estoppel as opposed to the facts allegedly justifying
a finding of estoppel).”349 PO20 then restated that “the Parties are to address the matters
344 Award, para. 528. 345 Award, para. 529. 346 Tr. Day 2 [Weeramantry] [10:22] to [11:2]. 347 Tr. Day 1 [Sheppard] [42:5] to [42:8] and [45:13] to [46:22]. 348 Tr. Day 1 [Sheppard] [40:8] to [41:7]. 349 Exhibit A-16, para. 34.
80
falling within the scope of PO15 especially paragraph 34.”350 The Applicants also remark
that submissions on estoppel and on “infection” as a matter of international law were
deemed outside the authenticity phase,351 pursuant to the intervention of the President at
the end of the 2015 Hearing: “[n]ot on the international law parts at this stage.”352 The
impact of this statement is however to be counterbalanced by the clear statement in PO20
that “[t]he present directions come in lieu of any different comments made by the Tribunal
at the [h]earing.”353 As a result, the Infection Issue under Indonesian law, which was
considered still to be part of the authenticity phase at the end of the 2015 Hearing, was
added to the list of excluded issues by PO20.
239. The notion of “excess of powers” is a reprimand of an exercise of powers by an organ
beyond the limits of its constituent instrument. In the circumstances of this arbitration, the
powers of the Tribunal flow from the combination of the arbitration clause in the BITs and
the ICSID Convention and Arbitration Rules. International arbitrators also possess inherent
powers for conducting the arbitration through procedural orders and directions, as
recognized by the ICSID Convention. The ICSID Convention includes in Section 3, on the
powers and functions of the tribunal, an Article 44 which directs the tribunal to decide any
question of procedure not covered by the ICSID Convention or the Arbitration Rules or the
agreement of the parties. The silence of fundamental texts on matters of procedure accounts
for the flexibility of these issues before arbitral tribunals and for the necessity to give them
considerable leeway in this regard, as the ICSID Convention does. In a like fashion to
determinations of the applicable law, there is a heavy threshold for demonstrating a
manifest excess of powers with respect to the determination, interpretation and application
of procedural rules by the tribunal. The ad hoc Committees in Wena or Repsol v.
Petroecuador explained that a manifest excess of powers within the meaning of Article
52(1)(b) of the ICSID Convention must be self-evident rather than the result of elaborate
350 Exhibit A-35, para. 5. 351 Tr. Day 2 [Sheppard] [20:18] to [20:22]. 352 Exhibit A-34, [Kaufmann-Kohler] [218:4] to [218:5]. 353 Exhibit A-35, para. 5.
81
interpretation.354 The Applicants have precisely been trying to demonstrate at great length
that the expression “legal consequences” was not understood by the Parties and had to be
explained by the Tribunal 21 months after it first appeared in PO13.355 Their dissatisfaction
with the interpretative exercise of the Tribunal in PO15 and PO20 does not amount to a
manifest excess of powers.
240. Finally, the Applicants raised at the Hearing on Annulment that the Tribunal manifestly
exceeded its powers by introducing a legal framework with the Minnotte direction whose
factual foundation had not been part of the hearing before the Tribunal in 2015. As
discussed above in the context of Article 52(1)(d), however, Churchill and Planet already
had presented substantial evidence and argument on issues of due diligence and due care,
both prior to making those investments and during the course of their operation. In these
circumstances, the Applicants have failed to demonstrate that the Tribunal’s consideration
of the legal implications of the evidence thus presented – after first alerting the Parties to
the Minnotte case and inviting their further submissions on the legal issues thus presented
– constituted a failure in the conduct of the proceedings beyond the Tribunal’s authority
and amounting to a manifest excess of powers.
ARTICLE 52(1)(E) OF THE ICSID CONVENTION: FAILURE TO STATE REASONS
i. Mr. Noor’s evidence
241. The Applicants contend that the Tribunal failed to state the reasons for the readmission of
Mr. Noor’s witness statement, or was inconsistent as to whether it had disregarded Mr.
Noor’s evidence. The Committee has already decided, contrary to the Applicants’
allegation, that the Tribunal did not use Mr. Noor’s evidence, so no failure to state reasons
arises, either in the sense of a contradiction in the Tribunal’s reasoning, or in the sense of
a failure to explain its reasons, for a non-existent procedural step.
354 Wena Hotels Limited v. Arab Republic of Egypt (ICSID Case No. ARB/98/4), Decision on Annulment, February
5, 2002, para. 35 (RLA-ANN-288); Repsol YPF Ecuador S.A. v. Empresa Estatal Petróleos del Ecuador
(Petroecuador) (ICSID Case No. ARB/01/10), Decision on Annulment, January 8, 2007, para. 36 (RLA-ANN-296). 355 Annulment Application, para. 52.
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ii. The Infection Issue
242. The Committee refers to the following passage of the decision on annulment of the Wena
ad hoc committee:
81. Neither Article 48(3) nor Article 52(1)(e) specify the
manner in which the Tribunal’s reasons are to be stated. The
object of both provisions is to ensure that the Parties will be
able to understand the Tribunal’s reasoning. This goal does
not require that each reason be stated expressly. The
Tribunal’s reasons may be implicit in the considerations and
conclusions contained in the award, provided they can be
reasonably inferred from the terms in the decision. […]
83. It is in the nature of this ground of annulment that in case
the award suffers from a lack of reasons which can be
challenged within the meaning and scope of Article 52(1)(e),
the remedy need not be the annulment of the award. The
purpose of this particular ground for annulment is not to have
the award reversed on the merits. It is to allow the parties to
understand the Tribunal’s decision. If the award does not
meet the minimal requirements as to the reasons given by the
Tribunal, it does not necessarily need to be resubmitted to a
new Tribunal. If the ad hoc Committee so concludes, on the
basis of the knowledge it has received upon the dispute, the
reasons supporting the Tribunal’s conclusions can be
explained by the ad hoc Committee itself.356
243. The Applicants say that the Infection Issue was dismissed on the basis of international law
without explanations as to why international law trumped Indonesian law. There is no need
for a Tribunal to provide reasons on issues which have become irrelevant to the outcome
of the case. The Tribunal agreed with the State that “claims arising from rights based on
fraud or forgery which a claimant deliberately or unreasonably ignores are inadmissible as
a matter of public international public policy.”357 In these circumstances, there was no
necessity to address the validity of the Exploitation Licenses as a matter of Indonesian law,
because the forgery was too serious:
356 Wena Hotels Limited v. Arab Republic of Egypt (ICSID Case No. ARB/98/4), Decision on Annulment, February
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